It’s about the details.

Anyone reading the quick headline from WCRI’s just-published analysis of employer direction may well draw the conclusion that there’s no difference in costs between states where the employee or the employer has the ability to choose the treating physician – a conclusion that would superficially right – but actually wrong.

A summary of the study notes it addresses “injuries that occurred mostly between 2007 and 2010 across 25 states in which either employers or workers control the choice of provider. It excludes states where workers can choose a provider within their employers’ established network.”

(I’m not sure if we’d see a difference if more current claims data were used as after 1/1/2014, full implementation of ACA may have affected claim allocation to work comp or non-work comp insurance.)

Note the nuance here; WCRI is careful to describe the “direction” metric as one dividing states into those where employers or employees have the MOST control. The “line” between employer-choice and employee-choice is really not a line at all, but rather a shading of white to black, with many permutations of grey.

For example, there are states where the employer can direct the patient to a specific doctor, others where the patient can choose from a panel, and still others where direction is only allowed if the employer has some sort of state certification.

Then there’s the ability of the patient to “opt out” for a course of treatment (Illinois) or change physician to another one, perhaps inside the panel or maybe completely outside the employer panel – after some defined period of time.

And let us not forget that employers can suggest, soft-channel, encourage, provide transportation to, or otherwise get an injured worker to a particular doc or facility in almost every state without violating the law – they just can’t FORCE the employee to go to a doc or choose from a panel of docs.

Or, as authors David Neumark and Bogdan Savych state; “it is common for employees to choose the medical provider when policies give employers control over provider choice, and for employers to choose the provider when workers have the right to direct this choice.”

A key statement: states that give “workers the most control over the choice of provider were associated with higher medical and indemnity costs among the small share of the most expensive back-related injuries…” In other words, claims that are harder to diagnose and where there is less unanimity in agreement on preferred treatment tend to be more expensive in employee-choice states. 

What does this mean for you?

My main takeaway is as it’s been for years – employers should do their damndest to get their employees to high quality physicians who know and understand workers comp.  And then get out of their way.

Value-based care is growing rapidly in the real world outside workers’ comp.  An excellent session asked if VBC will come to work comp.

Work comp care management today is really fee and utilization management using discounted networks and external vendors.

VBC involves bundled payments and is focused on the patient’s experience and results. Simply put, Value = Quality divided by Cost. That requires evidence based medicine, clinical practice guidelines, measuring outcomes, and monitoring and ensuring use of all these tools.

While VBC is complicated to implement in the real world outside work comp, the additional complexities inherent in work comp make it even more complex.  Dr Page noted there are few active VBC initiatives in workers’ comp.  While several states appear to support pilots, they are few, far between, and there doesn’t seem to be any results available just yet.

Dr Page sees objective measurement of outcomes – from the patient’s perspective – as key to the adoption of VBC in work comp.  She identified a sustained return to work as the desired end point.  While that’s true, as we learned yesterday – and undoubtedly you were well aware of this – there are any number of factors driving RTW that have nothing to do with medical care.  Employee-employer relations, psycho-social issues, the availability of employment are just three.  That being the case, I’m a little skeptical about the utility of RTW as the outcome point.

Other barriers to implementing VBC are

• the need for accurate, consistent, and comprehensive data;
• comfort and trust between the parties (alert!),
• and the inherent complexity of designing payment formulae that consider outliers, risk adjustment, comorbidities, and specific state laws favoring or limiting opportunities to direct patients to use and stay with specific providers.

So, while VBC has a lot of promise, my sense is we aren’t going to see any widespread use for a very long time.

Dr David Deitz noted that one challenge is the lack of ability for or interest among orthopedic surgeons in sharing risk around RTW may be a significant obstacle to surgical bundles.

What does this mean for you?

VBC is an idea whose time has come in the real world, and likely won’t ever come in workers’ comp.

Two recent articles in Health Affairs highlight a growing issue for employers and taxpayers; some hospitals are increasingly looking to work comp as a profit maker.

Depending on the state, facility costs can account for anywhere from around 32 – 40% of total work comp medical expenses (different states classify locations-of-service differently).

Ge Bai and Gerard Anderson examined the fifty US hospitals with the highest charge-to-cost ratios and found their markups over Medicare-allowable costs were three times higher than the average hospital.

This is critical in work comp because state work comp regulations often base facility reimbursement on charges – despite NO evidence or requirement that those charges have any basis in reality.

Fully 20 of the fifty hospitals are in one state – Florida – that uses a percent-of-charges reimbursement methodology for hospital outpatient services (manual is here).

Bai and Anderson’s latest work provides a deeper dive into hospital profitability.  A few key quotes:

• Hospitals with for-profit status, higher markups, system affiliation, or regional power, as well as those located in states with price regulation, tended to be more profitable than other hospitals.
• Hospitals that treated a higher proportion of Medicare patients, had higher expenditures per adjusted discharge, were located in counties with a high proportion of uninsured patients, or were located in states with a dominant insurer or greater health maintenance organization (HMO) penetration had lower profitability than hospitals that did not have these characteristics.

The methodology used by Bai and Anderson is somewhat different from that used by other researchers in that it excluded income from non-patient care services. I infer that they did this to focus specifically on the actual care delivery cost and not factor in other revenues from services such as parking, gift shops, investment income, etc.

So, what are the implications?

• Work comp is a soft target for facilities in many states
• The percentage-of-charges methodology is a license to…profit
• More profitable facilities have likely already figured out how to make the most revenue possible from every source – including workers comp
• Less profitable hospitals are going to learn from their more profitable competitors

Here’s one very effective way to reduce medical spend.

1. Identify low-cost providers.
2. Send your patients to them.

Do NOT send your patients to providers because they give a discount.

Do NOT send patients to providers because those providers are “in network.”

Fact is, there is wide variation between and among providers in the same geographic area – for the same procedure.

Another fact is, there’s no correlation between cost and “quality”.

There you have it.